takeover bid

an attempt by one or a number of companies to achieve the TAKEOVER of another company by bidding for (see BID) all or the majority of voting SHARES in the target company A number of terms are used to describe the various tactics available to the bidding and defending firms, including:

black knight; a firm that launches an unwelcome (contested) takeover bid for some other firm;

concert party; a number of investors who each buy shares in a company with a view to pooling their shareholdings and acting in concert to take over the company;

dawn raid; an attempt to buy up as many shares in a company as possible on the STOCK MARKET over a short period of time, as a prelude to making a full takeover bid for the company;

golden parachute; any generous severance terms written into the employment contracts of the directors of a firm that makes it expensive to sack the directors if the firm is taken over;

greenmail; a situation in which a firm's shares are being bought up by a (potential) takeover bidder, who is then headed off from making an actual bid, by that firm's directors buying these shares from him at a premium price;

leveraged bid; a takeover that is financed primarily by the issue of LOAN CAPITAL rather than share capital, which increases the CAPITAL GEARING of the enlarged firm. (see JUNK BOND);

pac-man defence; a situation in which the firm being bid for itself now makes a bid for the acquiring firm (see REVERSE TAKEOVER);

poison pill; a tactic employed in a takeover bid whereby the intended victim itself takes over or merges with some other firm, in order to make itself financially or structurally less attractive to the potential acquirer;

porcupine; any complex agreements between a firm and its suppliers, customers or creditors that make it difficult for an acquiring company to integrate this firm with its own business;

reverse takeover; an attempt by a smaller firm to take over a larger firm. Since the smaller aggressor company has a smaller capital than the victim, it must usually issue additional shares or raise loans to finance the takeover (see pac-man defence);

shark repellent; any measures specifically designed to discourage takeover bidders; for example, altering the company's ARTICLES OF ASSOCIATION to increase the proportion of shareholders' votes needed to approve the bid above the usual 50% mark;

white knight; the intervention in a takeover bid of a third firm which itself takes over or merges with the intended victim firm to rescue it from its unwelcome suitor. See also ARBITRAGEUR, MERCHANT BANK.

takeover bid

an attempt by one FIRM to TAKE OVER another by acquiring the majority of shares in a public JOINT-STOCK COMPANY. The financial terms of the bid may involve a straight cash offer or a mix of cash and shares in the bidder. The price being offered per share in the target company will generally exceed the value of that company's physical assets and the current stock exchange price of its shares. The price premium being offered by the takeover bidder reflects its valuation of the underlying value of that company's physical assets, brands, trade contacts, etc., and if these could be more effectively managed as part of the bidder's overall business. A number of terms are used to describe the various tactics available to the bidding and defending firms, including:

black knight: a firm that launches an unwelcome (contested) takeover bid for some other firm;

golden parachute: any generous severance terms written into the employment contracts of the directors of a firm that make it expensive to sack the directors if the firm is taken over;

greenmail: a situation in which a firm's shares are being bought up by a (potential) takeover bidder who is then headed off from making an actual bid by that firm's directors buying these shares from him at a premium price;

leveraged bid: a takeover that is financed primarily by the issue of LOAN CAPITAL (often in the form of‘junk bonds) rather than SHARE CAPITAL, which increases the CAPITAL GEARING of the enlarged firm;

pac-man defence: a situation in which the firm being bid for itself now makes a bid for the acquiring firm (see REVERSE TAKEOVER);

poison pill: a tactic employed in a takeover bid whereby the intended victim firm itself takes over or merges (see MERGER) with some other firm in order to make itself financially or structurally less attractive to the potential acquirer;

porcupine: any complex agreements between a firm and its suppliers, customers or creditors that make it difficult for an acquiring company to integrate this firm with its own business;

shark repellants: any measures specifically designed to discourage takeover bidders - for example, altering the company's articles of association to increase the proportion of shareholder votes needed to approve the bid above the usual 50% mark; (i) white knight: the intervention in a takeover bid of a third firm, which itself takes over or merges with the intended victim firm to ‘rescue’ it from its unwelcome suitor. See CITY CODE.

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